HODL. You will see it all over the Bitcoin space as one of the most common slang terms in bitcoin. It is the mantra of the relentless bitcoiner but is hodling going to do anything good for you in the long term? What does hodl mean? Where did it come from? How does someone hodl? Let’s take some time to learn more about the most used word in bitcoin.
Where Did HODL Come From?
HODL was first seen on a Bitcoin forum some years ago when a user misspelled the word “hold” whilst on a drunken rant about his inability to trade.
It has since been adopted by the Bitcoin community as the acronym “Hold On for Dear Life” but hodl actually means a lot more than “don’t panic sell”.
What Does HODL Mean?
HODL is the battle cry of many bitcoiners but not enough people seem to understand what it actually means. HODL means to hold onto your bitcoins for a long period of time. Instead of trading, taking profit or panic selling, hodling means to buy or accept bitcoin and then put it somewhere safe for a long time. In order to actually HODL, you need to control your private keys so if you keep your bitcoin on a custodial service like a Bitcoin exchange then you are not actually hodling your bitcoin, the exchange is.
Why Should I HODL?
HODLing puts YOU in control of your own bitcoin and not a custodial service like a bank or exchange. The whole idea behind bitcoin is that anyone who wants to be in control of their own finances can do so. If you decide to use a custodial service like a Bitcoin bank to keep your bitcoin, you are not HODLing.
How Do You HODL?
First, in order to hodl any bitcoin whatsoever, you need to actually have some bitcoin so you either need to A) accept bitcoin for payments or B) buy some bitcoin.
Second, you need to control the private keys. This is called self custody. Keeping your bitcoins at a custodial service like a bitcoin exchange is not hodling since you are not in control of the private keys. You need to use a bitcoin wallet that puts you in control of the private keys.
All of the best bitcoin wallets put you control of your private keys.
I personally recommend using a hardware wallet to keep your bitcoins in a secure offline environment for the utmost security for sending and receiving bitcoin. I also suggest that you take even further steps to secure the seed phrase of your private keys by punching your seed words into stainless steel.
Best Way To HODL Bitcoin
If you decide to purchase a large amount of bitcoin, I strongly suggest that you keep it on a hardware wallet and use a deep cold storage device to store your seed phrases or perhaps on a series of seed phrases in order to spread the risk of your bitcoins becoming compromised. Be sure not to make things overly complex, however; that is a danger in an of itself.
HOLD Keys In Cold Storage
Cold storage generally refers to keeping your private keys offline entirely by not even having them stored in any wallets even if it is a hardware wallet. So you might want to use a cold key storage device such as a Crypto Key Stack, a Steely or even a paper wallet to hide your seed phrase.
Bitcoin HODL Strategy
How long to hodl is entirely up to you but we have heard a number of theories on what it means to truly hodl. You need to decide if you’re going to be a short-term hodler or a long-term hodler.
Short Term HODL
A short-term hodl is keeping your bitcoin for only a short period of time. Think of a short-term hodl as a short-term savings account. You save for a little while and then spend them to buy something smaller like a TV, a vacation or a semester of college tuition. The halving takes places approximately every 4 years. If you decide to buy bitcoin today, you could hodl them for a short-term of up to 4 years and then spend or sell them. If you are more interested in using bitcoin as part of your retirement savings, then you are probably more interested in a long-term hodl.
Long Term HODL
In my opinion, a true HODL means that you keep your bitcoins for at least 210,000 blocks from the transaction that you received them in. The reason I use 210,000 blocks as a hodling period is because the block reward halvening occurs every 210,000 blocks (approximately once every four years). The reason I suggest hodling for at least 210,000 blocks is because of the 210,000 block HODL theory.
The 210,000 Block HODL Theory
The 210,000 Block HODL Theory states that every single bitcoin that has ever been mined or transacted is worth more 210,000 blocks after it was mined or transacted.
For example the bitcoin that were both mined and transacted in block# 274,271 are worth more 210,000 blocks later (block# 484,271) and are still worth more today. No fiat currency in the world can make the same claim.
The 210,000 block theory also works in retrospect. You can look at any bitcoin that has ever been mined or transacted and look at the bitcoins that were mined and transacted 210,000 blocks before it and every single satoshi is worth more.
This theory is why we encourage everyone to do everything that they can to buy or accept bitcoin and hodl it for at least 210,000 blocks. When any bitcoins are mined or transacted that do not adhere to this theory, we will no longer encourage long-term hodling.
Again, I personally encourage everyone I know to hodl their bitcoin on a hardware wallet and keep the seed phrase written down on some sort of deep cold storage device.
How NOT to HOLD
The Bitcoin space is full of stories of how people lost all of their bitcoins because they got too scared and panic sold, got hacked or bought other assets thinking they would go up in value. In order to truly hodl, you need to believe in the technology of bitcoin and not just some speculative asset game.
Do NOT Keep Your Bitcoin at an Exchange
Although Coinbase is a great place to buy bitcoin, they are a custodial service like your bank. Bitcoin HODLing is the exact opposite of having someone else HODL your bitcoin for you. The whole idea of HODLing is to put you in control of your own savings. If someone else is in control of your savings, then you aren’t.
Do NOT Panic Sell. HODL.
If you only care about bitcoin for the price, then you will panic sell when things get a little too volatile for you. When you are in bitcoin for a long-term HODL means that you will have your bitcoin for at least 210,000 blocks. Don’t panic sell.
Do NOT Hodl Just To Sell Back To Fiat
If you are only HODLing so you can “cash in” your bitcoin for a fiat currency like US dollars or French Assignats, you are HODLing wrong. Instead, try to spend them so as to help someone else to HODL. If you decide to trade on a Bitcoin exchange to increase the amount of bitcoin you HODL, be sure to move your profits out of the exchange and into a cold storage as quickly as possible.
The Economics of HODLing
To Fully understand why people HODL, it’s important to understand some of the economic principles that are built into the Bitcoin software itself.
Bitcoin’s primary function right now is as a store of value. A store of value is more often referred to as “savings” which is what HODLing is. HODL means SAVE your bitcoin for years down the road. Contrary to what you may hear in some forums and subreddits, bitcoin’s purpose is not to help a bunch of tech bros get rich quick and buy lambos. It’s a tool to create a more free and prosperous society.
Bitcoin’s supply is capped at a fixed amount of 21 million bitcoins. This digital scarcity is part of what gives bitcoin its value. When bitcoins are purchased from an exchange and used for savings, the supply of bitcoins that is available at exchanges is slightly less than before. As more people enter the Bitcoin space, they will need to fill higher sell orders at exchanges which puts upward pressure on the price which encourages more people to buy and hodl.
When you decide that you want to use your bitcoin as a medium of exchange, you will put downward pressure on the price if you fill open sell orders on exchanges. So, to support the price of bitcoin, use your bitcoin as a medium of exchange with other Bitcoin hodlers instead of selling it back to an exchange.
In short, savings is the primary function of bitcoin. That is why we HODL.
Final Thoughts
HODL was born from a typo in a Bitcoin forum that has since become the battle cry of true bitcoiners to show their true belief in bitcoin as sound savings. You should hodl to put yourself in control of your own money and financial future instead of a bank or custodian. You need to decide if you are a short-term hodler or a long-term holder but remember that every single bitcoin that has ever been mined or transacted is worth more 210,000 blocks later.
Hodl your bitcoins with wallets that put you in control of your private keys and not in any sort of custodial wallets. Secure your seed phrase and stamp it into metal. Don’t panic sell and don’t buy just so you can sell back to an exchange in the future. HODL because you see the long-term potential of a sound monetary system.
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